Process Performance Measurement as Part of Business ...

2

Process Performance Measurement as Part of Business Process Management

in Manufacturing Area

Jiri Tupa University of West Bohemia in Pilsen

Czech Republic

1. Introduction

Process performance measurement tools and techniques applied to enterprise environments

are essential for enterprise continuous improvement. It is the reason why the next

generation of process management leads to Process Performance Management or Corporate

Performance Management. The phrase Corporate Performance Management (CPM) was

coined by Gartner Group to describe the combination of process, methodologies, metrics

and technologies to measure, monitor and manage the performance of the business. The oft-

citied phrase: “ If I can not measure it, I cannot manage it” can be motivation of this chapter.

This chapter deals with presentation way leads to establishment of efficiency system for

process measurement and controlling in the manufacturing area. The process measurement

can be defined as the application of the management cycle with a focus on organizational

process. Muehlen present process management as the collection of planning, organizing and

controlling activities for the goal-oriented management of the organization’s value chain

regarding the factors quality, time, cost and customer satisfaction (Muehlen, 2004). The main

goals of process management are the achievement of transparency with regard to process

structure and process contribution.

The description and practical application of process performance management system will

be presented in case study. The case study also presents exploitation of data from an

enterprises information system for decision–making is next point of this chapter.

2. Related work and literature review

The process controlling has been discussed in the published books and papers in scientific

journal (Shen, 2007) and (Aalst, 2007). A. Kronz presents principal tasks of process

controlling in book (Scheer, 2006). He mentioned these points:

1. Evaluation, analysis and continues monitoring of business workflows (automatically or

manually),

2. Map the process reality in a task-oriented manner according to the issue and task.

3. Result of process controlling is transparency of the process, in structural terms and for

purpose of evaluation, Source: Process Management, Book edited by: Mária Pomffyová,

ISBN 978-953-307-085-8, pp. 338, April 2010, INTECH, Croatia, downloaded from SCIYO.COM

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4. Results can also be used as the basepoint for process optimization. Next author Michael zur Muehlen discusses in his book (Muhlen, 2004) of the workflow

audit trail data with existing data warehouse structures and develops a reference

architecture for process-oriented information system.

The term of process controlling has been often discussed in relation to process management,

because implementation of business process management is a way how to achieve of

process performance management system establishment. The “Process Management and

“Business Process” are contemporary terms used in the many companies. Many successful

companies applied this management approach based on Hammer’s Business Process

Reengineering Concept (Hammer, 1993). The authors develop the Hammer’s and Champy

ideas in related works nowadays.

Many articles in journals and international conferences proceedings deal with BPM issue.

High number of citations on business process management (BPM) seems to prove that BPM

is a significant field of the recent research (Harmon, 2008). For example a Google.com search

on „Business Process Management“ returns more than fourteen thousand pages where this

phrase appears. The BPM issue is the subject of research focused on methodological or

technological solution of BPM problems (Weske, 2007). The main problems are described by

Wasana Bandara in article (Bandara, 2007), where fourteen global experts were interviewed

for example. The problems examples show the lack of governance, lack of standards, lack of

methodology, lack of tool support for process visualisation etc.

The main principles of process measurement system are described by the authors and many

authors discuss about phrase Corporate Performance Management. The phrase Corporate

Performance Management (CPM) was coined by Gartner Group to describe the combination

of process, methodologies, metrics and technologies to measure, monitor and manage the

performance of the business. Prof A. W. Scheer discusses this issue and trends of CPM in

his book (Scheer, 2006).

CPM is thus directed at continues monitoring of the effectiveness of the results of all

company processes and the constant optimization thereof, i.e. its objective is a monitoring

system that monitors the business performance of all pertinent business processes all the

time, detects and reports weaknesses and problem situations, ideally even suggests

optimization option and evaluates the success of improvement measures. Substantive

recommendations for actions, including their chances of success, are needed so that the

better decisions can be made more quickly. Process Performance Management may be

regarded as the heart of CPM. (Scheer, 2006)

The present trends in Corporate Performance Management are:

- Process mining for automated weak point analysis - Right time monitoring - Dynamic organizational analysis These trends describe the purpose of application of process controlling in the manufacturing area. The application of process controlling based on process management principles for technological and diagnostics process control is one objective of our research. The main objectives of our research are design and verification of a control system based on business process management approach for control of process in the diagnostics and the electrical engineering and electronics manufacturing. In the following case study, I shall describe the practical demonstration of process controlling application.

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Process Performance Measurement as Part of Business Process Management in Manufacturing Area

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3. Research methodology and methodology framework

3.1 Design of generic methodology

Designed methodology concept helps to implement the process performance measurement system based on process controlling. The concept has been developed into two steps: 1. Analysis of processes and current needs of responsible managers, staffs, researchers

and technicians. The designed questionnaires can be used in this step. We have obtained process attributes of key processes.

2. Study, selection and modification of suitable methods and tools for business process management and performance measurement.

The application of designed methodology is demonstrated on case study. Data collection for this case study was conducted these different techniques: 1. Questionnaire – This method was used for process analyses and mapping of process

attributes. The main problems were done via structured question to management and workers.

2. Participation/Observation – The researches were able to observe and processes in operation and validate recorded data.

3. Interview – This method enabled the collection information of management vision and requirements.

3.2 Generic methodology framework

Methodology framework is presented by Table 1. As we can see the table presents key steps and activities in defined order. The methodology concept is based on business process and process performance management theory. It means application of Business Process

Table 1. Designed methodology framework

Step Activities Output

Business strategy definition

Analysis of current situation Definition of mission, vision and strategic goals.

Strategy are defined

Process design Implementation of process modeling methodology Process models making Definition of main optimization criteria Process optimization

Processes are designated.

Process Controlling Implementation and Indicators Setup

Design of process measurement and execution system Determination of periodicity of process measurement Implementation of tools for process measurement, execution and evaluation Design of system for correction proposal and improvement

System for process evaluation and execution of processes is implemented. Improvement system is defined.

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Management in first step. This step leads to: - process analysis and key process indicators setup - process description, modeling and optimization, - system of evaluation and process execution. The information infrastructure can be applied for the methodology support. The information structure should be built on Service Oriented Architecture (SOA) which provides methods for systems development and integration where systems group functionality around business processes and package these as interoperable services. SOA also describes IT infrastructure which allows different applications to exchange data with one another as they participate in business processes. Service-orientation aims at a loose coupling of services with operating systems, programming languages and other technologies which underlie applications.

3.3 Methods for process performance management

The current management literature presents different methods for process performance management. Firstly, they are methods based on financial analysis of basic enterprise economic indicators (for example Economic Added Value measurement, DuPont analysis). Secondly, they are management methods used the financial and non financial indicators (typically represented by Balanced Scorecard method (BSC), EFQM model, Six Sigma, Value Based Management). The Balanced Scorecard method sophisticated presents how to define and implement the key process indicators and metrics for performance evaluation. Many companies have adopted Balanced Scorecard as a way of evaluating managerial performance. This methods supplements traditional financial measures with three additional

perspectives: the customers, the internal business process and the learning and growth

perspective. It is supposed to be a tool describing an organization’s overall performance

across a number of measures on a regular basis.

The basic idea is very straight forward. Kaplan and Norton began by arguing that "What

you measure is what you get" and that "an organization's measurement system strongly

affects the behaviour of managers and employees." They went on to say that "traditional

financial accounting measures, like return-on-investment and earning-per-share, can give

misleading signals for continuous improvement and innovation..." To counter the tendency

to rely too heavily on financial accounting measures, Kaplan and Norton argued that senior

executives should establish a scorecard that takes multiple measures into account. They

proposed a Balanced Scorecard that considered four types of measures:

1. Financial Measures: How Do We Look to Shareholders? 2. Internal Business Measures: What Must We Excel At? 3. Innovation and Learning Measures: Can We Continue to Improve and Create Value? 4. Customer Measures: How Do Customers See Us? The BSC method gives a definition of strategy as hypothesis summary about causes and results. It can be declared as a sequence of “if – then”. The BSC, proposed by Kaplan and Norton, is the strategic management instrument: - to clarify and translate vision and strategy, - to communicate and link strategic objectives and measures, - to plan, set goals and align strategic initiatives, - to enhance strategic feedback and learning.

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4. Case study

The case study is focused on printed circuit board production. This production is one part of our department and its customers are other universities departments and small companies from the Pilsen region. The objective was to establish the performance measurement system focused on process time measurement and real processes current status analysis. This case study also presents application of designed methodology.

4.1 Business strategy definition

Definition of core problem and strategy of company was first task. The core problem of visualization was effectively solved by the Current Reality Tree (CRT). This chart shows causality of relevant undesirable effects of the analyzed situation. The practical example is shown in Fig. 1. The main problem is fall of profit related to production time, capacity and quality of process. On the other hand this situation might be described by a conflict diagram (Fig. 2). The diagram describes decision and optimizing problem of manufacturing - determination of optimum batch size. The conflict exists between increasing and decreasing of the batch size. The increasing of production run (D) makes to cost reduction (B) and decreasing (D) of the batch size makes to high quality of products (C). Both described situations have negative effect on the

Extending Term of Delivery

Long Time of Main

Production Process

High Cost on Processes

Idle Capacity of Machine

Lack of Qualified Worker

High Emphasis on Quality

Customer Decrease

High Number of Small and Difference

Orders

High Process Variability

Fall in Profit

High Product Price

Implication

Fig. 1. Current problem of causality

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AProduction

plan fulfilment

BProcess cost

reduction

CQuality requirements

fulfilment

DBatch size increasing

D’Bach size

decreasing

Conflict

Fig. 2. Conflict diagram of company

production plan and profit. These problems and conflict were solved by designing methodology effectively. So cost reduction, quality improvement and time reduction were the main optimizing criteria according to methodology. Secondly, the business strategy and main key process indicators were developed according to Balanced Scorecard. The Table 2 shows process indicators and the strategy is describes in ARIS model (Fig. 3). From this model we can make performance dynamic execution (it is part of last step methodology implementation).

Fig. 3. ARIS model of Balanced Scorecard business strategy

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Process indicators

Staffs Satisfaction

Internal Productivity

Customer Satisfaction

Training Course

Fail- ures

ROIProcess

Time Process Costs

Unit [%] [-] [%] [number] [number] [-] [min] [EUR]

Minimal Value

75 2 80 1 95 4 24 40

Maximal Value

100 4 100 3 100 8 72 60

Tolerance 5 5 5 5 5 5 5 5

Period Q Q Q Q Q Q Q Q

Planned Value

95 3 90 2 99 5 48 50

Current Value

95 1,5 85 2 98 5,3 75 75

Table 2. Strategic indicators

4.2 Process design

The process analysis and process modelling was the first important steps lead to process

design. It contained following activities:

- definition of the process model and attributes. It means determination of targets, key processes fragments, key performance indicators (KPI) and their dimensions,

- processes fragment modelling (Fig. 5).

Order acceptance Job Engineering Manufacturing ExpeditionProduct Design

Control Processes

Support ProcessesProcess

Symbols:

Process

Main Processes

Fig. 4. Core process model of PCB production

The ARIS (Architecture of Integrated Information System) tools and process analyses were

used in this part. The main problem was fall of profit related to production time, capacity

and quality of the process. Due to this fact, the process controlling application based on

CPM leads to this core problem minimization.

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Etching Operator

Photorezist

Application

End of Etching

Start of event

Event

Process

Symbols:

Fig. 5. Model of process fragment

4.3 Process controlling implementation and indicators setup

We decided use the ARIS Process Performance Manager (ARIS PPM) software tool for process controlling in this case, because this tool can be implemented to any information system and structure. The information technologies make the important support for business process management nowadays. Owing to the fact that we are using tools ARIS for process modeling and optimization of processes, we decided to use the software ARIS PPM. With ARIS Process Performance Manager, IDS Scheer company offers a software solution

that is a purpose-built for controlling and analyzing business processes. As a part of this

solution, a patented procedure is used to collect process relevant data from the operational

IT systems available for reconstructs process automatically and calculates key performance

indicators online and particularly for presenting the actual process measurement in the form

of event-driven process chains (eEPC).

ARIS PPM imports all business transactions to be reviewed into the repository from one or more source systems via application-specific adapters. To begin with, depending on the source system, the process-relevant runtime information about the activities performed is highly disparate in nature (e.g. log files, vouchers, records). These are imported one after the other in chronological order by ARIS PPM and compiled into a process. A graphical illustration – the “event-driven process chain” (EPC) - containing all the individual activities (functions) are then generated automatically for each operation (process instance) – see Figure 8. As a result, even a process that extends beyond the boundaries of a single system can be represented cohesively and uniformly. The ARIS Process Performance Manager tool has these important functions for Process

Performance Management:

- Visualizing Real Process Structure - Key Performance Indicators and Analyses - Process documents - Weak Point Analysis - Process Mining: Automated Weak Point Analysis - Management Views - Offline Reports

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Key process indicator Type Category Description

Interval of order processing Process Time

Process duration from an

order acceptance till issue of

an invoice.

Interval of acceptance of an order Process Time Sub process duration:

“Receipt of order”.

Interval of PCB design Process Time Sub process duration:

“Design of PCB”.

Interval of manufacturing

preparation Process Time

Sub process duration:

“Manufacturing data

preparation”.

Interval of PCB manufacturing Process Time Sub process duration

“Manufacturing of PCB.

Interval of PCB expedition Process Time Sub process duration: “PCB

expedition”.

Interval of invoice issue Process Time Sub process duration: “Issue

invoice”.

Activity process time Function Time

Difference between the end

of current activity (process)

and the end of previous

activity.

Processing time of an activity Function Time

Difference between the end

of activity and the start of a

particular activity.

Idle time of activity Function Time

Difference between the start

of an activity and the end of

previous activity.

Keeping the order term Function Time

Difference between planned

and real order completion

date.

Table 3. Key process indicators definitions

The basis for all processes controlling is a process-oriented key performance indicator

system that links the process perspective to the essential controlling aspects for business.

The key performance indicators must enable conclusions to be drawn regarding the

effectiveness of the processes (e.g. customer satisfaction) and their efficiency (e.g. processing

time, delivery reliability, process quality and costs). In addition, the process-oriented key

performance indicator system is configured so that it would be possible to make statements

about the actual course of the process.

Pre-configured process key performance indicators are calculated and aggregated for each

imported process stage. The ARIS PPM base system already includes a core set of key

performance indicators, and these are set as default ones regardless to a connected source

system. The key performance indicator types can be divided into 3 groups:

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- time-related key performance indicators (e.g. throughput times, processing times, frequencies),

- cost-related key performance indicators (e.g. process costs/rates on the basis of the performance standard) and

- quality-related key performance indicators (e.g. number of processors, error rates, deadline reliability)

The process owner can use ARIS PPM to achieve the optimum balance in the ”Time-Quality-

Cost” magic triangle by taking a number of key performance indicators from each of the

three ranges with added weighting and thus to yield a new key performance indicator.

These user-defined key performance indicators can be set in the front-end at any time

during runtime. Besides the preset key performance indicators, other specific key

performance indicators are configured in the ARIS PPM base system as a part of the

adaptation to the customer individual environment.

These are defined, for instance, by the process types to be reviewed. The key performance

indicators in ARIS PPM are endowed with process-relevant decision variables -

”dimensions”. These dimensions are also imported from the source systems as features of

the individual process instances. The user evaluates the efficiency of his business processes

with reference to the interplay between key performance indicators and dimensions in the

process analysis.

The set of key performance indicators must be calculated and defined flexibly, and in such a

way that it can be expanded to the need of changing requirements of the company specific

processes. Besides calculating key performance indicators, it is also necessary to be able to

visualize the structure of actual processes since, it is the only way to how obtain generalized

explanations for their performance behaviour.

The implementation of ARIS PPM tool has been formulated in project. The project main

phases were:

1. Implementation for printed circuit board manufacturing.

2. Verification and validation of results from implementation for PCB manufacturing.

3. Implementation for diagnostic process control.

4. Verification results and examination implementation proposal.

The first two phases were realized in following steps:

1. Conceptual and technical workshop

2. Determination of process instance, fragments, KPI and process attributes. The results of

process mapping and analysis from previous part were used in this step. The Table 3

presents used KPI.

The SW tool implementation means installation, customizing and connectivity settings. The

manufacture section does not use information system now and data must be recorded on

operation record cards. Due to this fact, we had to prepare the special software for CSV files

generation and rewrite the data into SW ARIS PPM database using PC. Validation of results

and their definition is last step of implementation.

4.4 Result of process controlling implementation

First experience of PPM implementation, based on CPM idea, has shown benefits of this

solution in the manufacturing area for technological process control, in this case for printed

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circuit board manufacturing. The SW tool ARIS PPM helps us to make analysis and

processes monitoring, particularly:

- real process course, - processes time, - comparing of the real and planned key indicators value, - type and kind of order. The results of process mining and analysis have been used for process models correction and KPI planning. In short, the responsible management obtains quick management and performance view (see Fig. 7, 8). The solution mentioned above doesn’t use sophisticated information system. In this phase

the data about process has been collected in excel files. The records from the paper sheet in

manufacture section had to be rewritten to ARIS PPM database. In consequence of this we

had to realize software for data converting from excel database to ARIS PPM database (CSV

data format was used for this converting operation). It is obvious that this way isn’t suitable

for big data volume. From this reason, the suitable information system has to be

implemented in the next project phase. The structure and components of used information

system presents Fig. 9.

Time span of manufacturing preparation [Day(s)]

Speedometr presentation

Process cycle time

Time span of order processing [%] Time span of invoice issue [Day(s)]

Idle time of function Number of processes (Jun 06)

Fig. 7. Management view

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Process fragment

Operator XOR

Operator AND

Event

Function

Fig. 8. Visualization of a process instance generated in ARIS PPM

REAL PROCESSES

KPI

IS

APPLICATION

Process Data Source

Server Client

ARIS

TOOLSET

Process Database

ARIS

PPM

Server Application

ASCII/CSV

Files

Fig. 9. Information system structure

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5. Conclusion

This chapter presents an example of process controlling application. Process controlling described in this paper, comprises the following components: - Evaluation of the efficiency of business processes based on key performance indicators - Transparent representation of procedures actually performed for cause analysis. - Deduction of optimization measures. - Continuous monitoring of success developments. - Organizational analysis. The process controlling is very important tool for process improvement in manufacturing

area. The real application in manufacturing area was described in the practical case study

focus on the small printed circuit board production. The case study describes way how to

analyze the processes and introduces software tools, which have been applied. The benefits

and results are documented in the Figures 7-8 as well.

This solution corresponds with the new trend in process management area. Companies that

are able to align their business processes to the requirements of their environment and

surroundings will not only gain a competitive advantage, but they will also be able to

manipulate this alignment better and faster than their competitors. The prerequisites for this

solution are the supply of decision-relevant information and an ability to transform this

information quickly and effectively into sustained measures for targeted alignment of

business processes.

6. Acknowledgments

This research is supported by the research plan MSM4977751310 “Diagnostic of interactive

processes in electrical engineering“.

7. References

Muhlen, M. (2004). Workflow – based Process Management, Logos, Verlag Berlin, ISBN 3-8325-

0388-9, Berlin.

Scheer, A. W. et al., (2006). Corporate Performance Management, ARIS in Practice, Springer

Verlag, ISBN 3-540-30703-6, Berlin.

Shen, W.; Tan, W.; Zhao, J. (2007). A methodology for Dynamic Enterprise Process

Performance Evaluation. Computers in Industry, Vol. 58, Issue 5 (June, 2007), pp.

474-485, ISSN 0166-3615.

Aalst V., et al. (2007). Business Process Mining: An Industrial Application. Information

System, Vol. 32, No. 5 (July, 2007), pp. 713-732, ISSN 0306-4379.

Harmon, P.; Wolf, C. (2008), The State of Business Process Management. A BPT Report,

<http://www.bptrends.com/members_surveys/deliver.cfm?report_id=1003&targ

et=BPTrends 2008 Survey Report 2-11-08 Final,

V_2_.pdf&return=surveys_landing.cfm>, (accessed September 5, 2009).

Hammer, M.; Champy, J. (1993). Reengineering the Corporation: Manifesto for Business

Revolution, Harper Clins Publisher. New York.

Weske, M. (2007). Business Process Management, Springer Verlag, ISBN 978-3-540-73521-2,

Berlin.

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Bandara, W. et al. (2007). Major Issues in Business Process management: an Expert Perspective,

<http://www.bptrends.com/publicationfiles/09-07-ART-MajorIssuesinBPM-

Chong%20et%20al.pdf>, (accessed September 5, 2009).

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Process ManagementEdited by Maria Pomffyova

ISBN 978-953-307-085-8Hard cover, 338 pagesPublisher InTechPublished online 01, April, 2010Published in print edition April, 2010

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The content of the book has been structured into four technical research sections with total of 18 chapterswritten by well recognized researchers worldwide. These sections are: 1. process and performancemanagement and their measurement methods, 2. management of manufacturing processes with the aim to bequickly adaptable after real situation demands and their control, 3. quality management information andcommunication systems, their integration and risk management, 4. management processes of healthcare andwater, construction and demolition waste problems and integration of environmental processes intomanagement decisions.

How to referenceIn order to correctly reference this scholarly work, feel free to copy and paste the following:

Jiri Tupa (2010). Process Performance Measurement as Part of Business Process Management inManufacturing Area, Process Management, Maria Pomffyova (Ed.), ISBN: 978-953-307-085-8, InTech,Available from: http://www.intechopen.com/books/process-management/process-performance-measurement-as-part-of-business-process-management-in-manufacturing-area

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